Correlation Between Invesco Treasury and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both Invesco Treasury and SSgA SPDR at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Invesco Treasury and SSgA SPDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Treasury Bond and SSgA SPDR ETFs, you can compare the effects of market volatilities on Invesco Treasury and SSgA SPDR and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Invesco Treasury with a short position of SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Treasury and SSgA SPDR.
Diversification Opportunities for Invesco Treasury and SSgA SPDR
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Invesco and SSgA is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Treasury Bond and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Invesco Treasury is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Invesco Treasury Bond are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Invesco Treasury i.e., Invesco Treasury and SSgA SPDR go up and down completely randomly.
Pair Corralation between Invesco Treasury and SSgA SPDR
Assuming the 90 days trading horizon Invesco Treasury Bond is expected to under-perform the SSgA SPDR. But the etf apears to be less risky and, when comparing its historical volatility, Invesco Treasury Bond is 1.17 times less risky than SSgA SPDR. The etf trades about -0.01 of its potential returns per unit of risk. The SSgA SPDR ETFs is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,414 in SSgA SPDR ETFs on September 23, 2024 and sell it today you would earn a total of 547.00 from holding SSgA SPDR ETFs or generate 16.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Invesco Treasury Bond vs. SSgA SPDR ETFs
Performance |
Timeline |
Invesco Treasury Bond |
SSgA SPDR ETFs |
Invesco Treasury and SSgA SPDR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Invesco Treasury and SSgA SPDR
The main advantage of trading using opposite Invesco Treasury and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Treasury position performs unexpectedly, SSgA SPDR can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.Invesco Treasury vs. UBS Fund Solutions | Invesco Treasury vs. Xtrackers II | Invesco Treasury vs. Xtrackers Nikkei 225 | Invesco Treasury vs. iShares VII PLC |
SSgA SPDR vs. UBS Fund Solutions | SSgA SPDR vs. Xtrackers II | SSgA SPDR vs. Xtrackers Nikkei 225 | SSgA SPDR vs. iShares VII PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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